What Is Organizational Culture and Why Is It Important?

Here's how to transform your workplace culture to skyrocket performance.

KEY POINTS

• Organizational culture is the collective mindsets and behaviors of a company.
• A positive workplace culture increases employee engagement, motivation, and retention.
• Leaders can leverage seven unique psychologically-based strategies to shape culture.

Organizational culture is like the personality of an organization. It's about how everyone, from leaders to the newest hires, thinks and acts. It shapes how work gets done and how people treat each other.

Organizational culture includes the unwritten rules and shared beliefs that guide people's behavior. For instance, a company that values open communication might have meetings where everyone is encouraged to speak their mind, leading to better ideas and stronger performance.

Alternatively, if an organization has a culture where only the most senior employees' ideas are welcomed in meetings, it might lead to frustration and apathy for everyone else because others may feel their voice doesn't matter.

Culture: The Unique DNA of Every Organization

Culture is the underlying DNA of every organization—it's what makes employees feel connected and invested in their jobs. When a company has a strong, positive culture, it can foster greater engagement, which means people care more about their work and go the extra mile. Positive cultures boost motivation, leading people to do their best and be happier in their jobs. Such feelings of connection and satisfaction can lead them to stay longer with the company, reducing turnover and building a strong, experienced team.

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When a culture encourages new ideas and open-mindedness, employees are more likely to come up with the kind of breakthroughs that can change the game for a business. In such an environment, teams work better together, share more ideas, and push each other to be the best they can be, which often leads to greater success for the whole organization.

Seven Strategies for Creating Positive Organizational Cultures

There are many ways to foster a positive business culture. Managers and leaders can focus on the following:

Vision and Mission Clarity: A compelling vision and mission statement act as the psychological contract with employees, offering a clear narrative about what the company stands for and its aspirations. When a company like Google pledges to "organize the world's information," it sends a powerful message about its purpose, aligning the workforce towards a common goal. Leaders can facilitate workshops and discussions to ensure these statements resonate deeply with every team member, thereby internalizing these guiding principles.

Values in Action: Core values are the psychological pillars of an organization's culture. When the online retailer Zappos emphasizes "delivering WOW through service," it's not just a statement but a call to action that employees live by so they deliver exceptional service. Leaders can make these values tangible by embedding them into performance reviews, hiring criteria, and daily operations, ensuring they're not just words on a wall but principles that drive decision-making and behavior. It's also important that leaders themselves act in a way that's consistent with the values they want to see enacted more broadly.

Habitual Practices: The power of culture is often expressed in the small, repeated actions that become habitual. For example, Pixar's practice of holding candid "braintrust" meetings where creative ideas are dissected and debated creates an environment where innovation is routine. Leaders can create rituals or regular meetings that reinforce openness and collaboration, turning them into powerful symbols that reinforce the organization's culture.

Learning and Development: Cultures that prioritize learning communicate to employees that growth is both expected and supported. Amazon's "Career Choice" program is a testament to its investment in employee development, covering tuition for in-demand fields. Leaders can foster a culture of learning by actively investing in employee development and creating clear pathways for career advancement.

Psychological Safety: At the heart of a thriving culture is the sense of psychological safety, a term coined by Harvard University professor Amy Edmondson, which describes an environment where individuals feel comfortable expressing themselves without fear of retribution. Google, for example, found that its teams with high psychological safety were more successful than those with lower psychological safety. Leaders can cultivate this by modeling vulnerability, encouraging open dialogue, and celebrating learning from failures.

Recognition and Rewards: A culture that celebrates achievements—both big and small—can significantly boost morale and productivity. Salesforce, through its "Ohana Culture," has created a sense of community and belonging where recognition is part of the everyday experience. Leaders can implement recognition programs that allow peers to acknowledge each other's contributions, making recognition a regular part of the organizational rhythm.

Agility and Resilience: The most adaptable cultures are those that embrace change. Leaders can promote agility by encouraging a mindset of continuous learning and by designing systems that are flexible and responsive to feedback, ensuring the organization can navigate and thrive amidst disruptive change.

Creating a High-Performance Culture

Creating a culture that promotes high performance requires a deep psychological understanding of human behavior within a business context. By carefully crafting and nurturing the elements that constitute culture, leaders can foster an environment that not only drives innovation and high performance but also leads to a sense of purpose and belonging among its members. Building a cohesive community focused on achieving purposeful goals is a critical imperative for making organizations and the world a better place.

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Soren Kaplan is the author of Experiential Intelligence , columnist for Inc. Magazine, co-founder of the AI-Powered Digital Transformation platform Praxie.com , and an affiliate at the Center for Effective Organizations at USC’s Marshall School of Business. Business Insider and the Thinkers50 have named him one of the world’s top management thought leaders and consultants. For press, media, and speaking inquiries, visit sorenkaplan.com